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Income Tax Act 2007

General collection rules - Withholding tax on resident passive income (RWT)

RE 7: When resident passive income paid to trustees

You could also call this:

“Rules for trustees receiving passive income on behalf of others”

When someone pays money to a trustee, there are special rules about what the trustee must do. These rules apply when the money is a type called ‘resident passive income’, which is a kind of income that doesn’t come from work.

The trustee (called person A) must follow these rules if they’re getting the money for someone else (called person B). The rules say that person A has to take some of the money out (this is called withholding RWT) and give it to the government if:

  1. They don’t have something called RWT-exempt status.
  2. They’re getting the money as part of their job or business.
  3. They’re not just holding the money for someone else in a special way (which has different rules).

If all of these things are true, person A must take out the RWT and send it to the government. They have to do this right when they get the money, for any part of it that hasn’t already had RWT taken out.

There’s one more thing to know: sometimes there’s another rule (section RE 9) that might change what person A has to do. If that rule applies, it’s more important than these ones.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520210.

Topics:
Money and consumer rights > Taxes
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“When it's unfair to expect someone to withhold tax from a payment”

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RE 8: When resident passive income paid to nominees, or

“Rules for receiving income on someone else's behalf”

Part R General collection rules
Withholding tax on resident passive income (RWT)

RE 7When resident passive income paid to trustees

  1. This section applies when—

  2. an amount is paid to a person (person A) who is acting as trustee for another person (person B) at the time; and
    1. some or all of the amount is resident passive income other than a replacement payment under a share-lending arrangement; and
      1. person A—
        1. does not have RWT-exempt status under section RE 27 at the time of the payment; and
          1. is paid the amount in the conduct of a taxable activity carried on by them; and
            1. is not a nominee to whom section RE 8 applies.

            2. At the time the payment is made and to the extent to which it has not already been withheld, person A must withhold RWT for the payment and pay it to the Commissioner.

            3. Section RE 9 overrides this section.

            Compare
            Notes
            • Section RE 7(1)(c)(i): amended, on , by section 221(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
            • Section RE 7 list of defined terms RWT-exempt status: inserted, on , by section 221(2)(a) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
            • Section RE 7 list of defined terms RWT exemption certificate: repealed, on , by section 221(2)(b) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).